Netwealth Group Limited (NWL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Netwealth Half Year Results 1H 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Matt Heine, Joint Managing Director. Please go ahead.

Thank you very much, and good morning, and welcome to the Netwealth Group Limited Half Year Results. This is our second virtual half year results period; and hopefully the technology works better than it did last time. Today, I'll be leading you through a company update, and I'm joined by Grant Boyle, our Chief Financial Officer; and my Joint Managing Director, Michael Heine, who unfortunately, due to a back injury, won't be participating during the bulk of this session but hopefully will be towards the end for Q&A. If we can move to Slide 7, please. So as you may have seen from the presentation that was loaded up earlier, Netwealth has had a fantastic half year period. We've delivered 34.5% NPAT growth on PCP and recorded EBITDA of $40.5 million for the period. As you'll see from the number below, this has got a very high correlation to our operating net cash flow, also at $40.5 million. From a total income of $72.4 million, we've derived an EBITDA margin of 56%, NPAT of $27.6 million and an EPS of $0.113. This morning, at the Board meeting, the Board has declared an interim dividend of $0.0906 per share. Pleasingly, we were also recently recognized as a top 200 company in Forbes Best Under a Billion Award. The award is provided to companies with less than $1 billion in U.S. revenue that have demonstrated consistent top and bottom line growth, low debt and robust governance. And hopefully, you can see that from the results we've just gone through and also from the results that we will continue to walk through. From a business perspective, our FUA continues to grow significantly. And at the end of December, we announced FUA growth to $38.8 billion. As of yesterday, that figure has grown to $40.7 billion, an increase of $1.9 billion in the first 6 weeks of this calendar year. And from a flows perspective over the 6 months, FUA net inflows increased by 4.5% -- sorry, $4.5 billion. Our FUM, which consists of our home brand Netwealth-branded managed funds and the Netwealth Managed Account has grown to $9.3 billion, an increase of $1.5 billion in net flows. And the managed account, which is a key product and continuing to drive significant growth across the business, has grown to $7.6 billion, an increase for the half of $1.3 billion. Other notable events during the 6-month period, as we announced, a strategic investment in Xeppo, which I'll touch on later in the presentation. And we've seen an increase in our earned per account from -- sorry, of 6.5% from $1,666 in the first year, up $102. Our average account size over the period has also increased, to $440,000 at the 31st of December, and our market share continues to grow and currently sits at 4.1%. Following on from that, you can see a quick snapshot of how the industry is tracking. The chart on the left-hand side shows the increase in our market share from 2.9% to 4.1% over the period. And more importantly, it shows how the large incumbent platforms, in many cases, are going backwards, while specialist platforms continue to grow. On the right-hand side, $9.5 billion growth over the 12 months to the end of September, which has put Netwealth into the first place position for top inflows for the 10th consecutive quarter. And again, this [ step ] shows a very different story from those specialist platforms that continue to grow and the incumbents. If we can please move to Page 11. The growth continues and has been very strong for many years now. And as we've explained on a number of occasions, the beautiful thing about our growth is that a lot of that growth actually comes from existing clients that continue to move new clients onto the platform. You'll see that our total growth for the half year of $7.3 billion, which includes net flows and market movement, represents a 23.2% growth. Of that, 83% or $6.1 billion of it came from existing advisers, I mentioned, putting new business on. The green bar represents a large transition that continues to move across as well as other smaller ones. If we can please move to the next slide. Looking forward, and from a strategic perspective, Netwealth is very focused on a number of significant trends that we see are shaping and have shaped the wealth management industry in the last couple of years, and we believe, over the next 5 years. There's absolutely no doubt that the COVID experience over the last 6 to 12 months has driven digital adoption significantly and fast-tracked it, in many cases, 5, maybe 10 years. What that means as a business, and also as a platform, is that we need to be very focused on understanding what consumers are using, how they're using it and what their expectations are from their financial services firms. To this end, I'll talk to the strategy in place that we are looking to adopt to make sure that we harness that major trend as the age of the digital client -- of the customer, and where customers are now expecting or benchmarking our service and experience they have with us against the world's largest tech companies. Equally, a global trend that we're seeing play out in Australia is that we're seeing many financial advisers and wealth professionals moving from investment experts to wealth coaches where they'll look to partner or outsource the investment piece and focus on the strategic advice that they can provide to their clients. This lends itself well to MDA solutions as well as SMA solutions. And there's no doubt that, that's growing -- a big part of the growth within our managed account product. We're also seeing a proliferation of advice technologies, where advice firms and clients are using an increasing number of tech solutions to basically support their service delivery and their investment propositions. As part of that, Netwealth is constantly looking at how we can make sure that we are not only part of that ecosystem but can continue to contribute to the ecosystem and deliver new services and products to help advisers deliver better advice to their clients. And when you look at all of those different trends, the modern advice delivery model continues to change rapidly. Margins are being squeezed across the board from advisers through to fund managers and platforms. And everyone is looking at how they can provide more modern, better digital experience, and grow those margins over time. Moving to Slide 13, please. To counteract this, we've been embarking on a multiyear strategy to expand the notion of what a traditional platform can do. We've critically examined all the different parts of our business, and we're looking at where the opportunities are for the future. A big part of our future, not dissimilar to many other companies, is that data will play a critical role. And we're really looking to put client data and also external data at the center of everything we do. It will inform business decisions. It will inform adviser decisions. It will help us deliver actionable insights to our clients and also make sure that we're able to deliver a rich and engaging experience that caters to not only our clients' platform assets but their whole of wealth, whether that's their property, external banking or data from other sources. Sitting around our data strategy is our flagship wealth strategy, which continues to prosper and will continue to be the major engine room for our future growth. This includes products such as our Investment Wrap, the Wealth Accelerator, our Super/Wealth Accelerator product, our Managed Account as touched on a number of times, and our home brand Netwealth-branded managed funds, which I'll also come back to. Sitting around that is our technology solutions, which include the recently released Xwrap, which allows clients and advisers to cater for their off-platform noncustodial assets, administer and report on them. This is a new product that was released back in September after being in beta for a couple of years and has been exceptionally well received by the industry. We're also looking to roll out a mobile app and a number of other services. If we can move to Slide 14, please. From a strategic initiative perspective, not surprisingly, many of them tie back to our broader strategy. And our first big initiative was the investment into Xeppo. Xeppo is a fintech data analytics provider that aggregates data from a whole range of different sources to consolidate accounting, mortgage, wealth and CRM information into a single client view. And I'll show you what that looks like shortly. As I touched on, Xwrap was launched and allows us to really spearhead the high net worth market as well as assets that belong to mainstream retail clients such as property. And in the next half, we'll be launching a brand-new mobile experience for iOS and Android that's going to significantly improve the client experience. And importantly, with integrations with Xeppo and other third-party providers, provide additional Whole of Wealth reporting for clients looking at efficiency and also engagement. From our flagship wealth perspective, during the period after the successful launch of our new premium product, which is -- specifically caters to the high net worth, ultra-high net worth and charitable and philanthropic sector, we've now got 3,447 premium accounts at the end of December, which pleasingly in the half grew by 817 accounts. There is huge demand for these products, as you can see from those numbers, and it's continuing to grow rapidly. As part of our GSS or home brand, managed fund strategy, we're also delighted to launch 2 new active funds with Magellan. And Netwealth now offers a Netwealth version of the Magellan Infrastructure Fund and also the Magellan Global fund. We'll look to continually roll out other mandate funds throughout the year, with the next couple of strategies being focused on domestic managers. If we can move to Slide 15, please. Just going back to our strategic investment in Xeppo, trying to explain in a little bit more detail what it does. So Xeppo, as I mentioned, is a fintech data aggregation platform where effectively it connects to more than 26 different enterprise solutions. So it could be Xero, MYOB, companies like Class, Iress, AFG Finance and Mortgage platforms, Moneysoft, OPEX or Microsoft SharePoint. Every night it takes that data and uses the -- using an API connection, matches that client data to individual clients, syncs it and then normalizes it. So all of that data across all of those different systems will then create a single client record, which can then be fed up into a variety of different software solutions. So you might want to use that client information in your marketing system such as MailChimp. You might use the Xeppo CRM or Workflow, push and pull documents into SharePoint, use Power BI to get very sophisticated reporting across the licensee or the practice. Or, in the future, log in to a Netwealth client portal and be able to view your accounting information or information from other platforms. It's a very, very powerful system. And pleasingly, the take-up by existing Netwealth clients has been strong, and the pipeline for Xeppo of clients looking to adopt the solution, both as a data provider, but also as a CRM provider, continues to be incredibly encouraging. If we move to Page 16, please. I appreciate this is a little bit hard to see, but this is a couple of the views that, as a Xeppo user, you might expect to see when you log in as a practice or as an adviser and/or a licensee. What you can see here is all of those different data sources from the 26 different providers, normalized, consolidated and displayed into simple dashboards. So on the left-hand side is the practice. You'll be able to see what debtors are outstanding, what fees are being earned, brokerage, total revenue across the firm. And at the client level, you'll be able to see their total net worth, various bank accounts, credit cards, loans, properties and investments as well as the net profit from accounting systems such as MYOB or Xero, or information from their SMSF accounting services, such as Class. It's incredibly powerful. We've not seen another system in the market that can do nearly what Xeppo does. And our additional investment will allow them to fast track many of the plans over the next 12 to 18 months, including that tight integration with Netwealth, which we're extremely excited by. Turning to Page 17, please. And finally, before I hand over to Grant Boyle, our CFO, to go through the numbers in a bit more detail. Just say we're really pleased to announce that we've had another good year, another award-winning year. Yesterday in the Investment Trends Platform Benchmarking Report, we were delighted to see that we were #1 or won 4 out of 6 categories. Whilst we missed out on the top spot by 0.1%, we're equally -- we're extremely proud of what we've achieved over the last 12 months, and we've got a fantastic pipeline of new developments due over the next 6 to 12 months. We remain the #1 platform for Overall Satisfaction, having won that for the ninth year in a row last year. And Chant West has nominated Netwealth or awarded Netwealth as the Best Advised Product for the year for the last 3 years. And I mentioned the Forbes Best Under a Billion award earlier. So it's been a good year. We're incredibly excited about what's coming up over the next 6 months, and happy to take questions at the end. Handing over to you, please, Grant.

Yes. Thanks, Matt. So Matt summarized some of the -- just want to mute your phone, please. Yes. So Matt summarized some of the metrics when he was doing his update. So they're summarized on Slide 19. So we're very pleased to be able to report that we've successfully grown across all of our key profit and loss metrics with strong growth across platform revenue, EBITDA and the net profit before -- after -- before and after tax. So this slide summarizes the improvement when compared to the prior year. Platform revenue was at $71.2 million for the first half, which is up 24.1%. And that was predominantly driven by the huge increase in our funds under administration, which grew by 36% over that same period. The majority of our revenue continues to be recurring in nature and therefore, is relatively predictable and stable. However, pleasingly, in the first half transaction fees were actually a significant and increasing revenue source. So this is due to the strong trading volumes and the additional revenue streams and improving supply margins that were -- which come with our increased scale. Operating expenses over the same period were -- increased by 15.8%, which is delivering good operating leverage, which is flowing through to the EBITDA margin. As stated in the previous updates, we are continuing to increase our investment in the technology teams to ensure that we have one eye on the future and to maximize the current growth opportunity and that we continue to lead the market for growth rates, service and functionality. Our investment, obviously, is key to achieving that objective. We continue to expense all of our internal development costs. So there's no capitalization of our IT resources, and -- so none of that's capitalized on the balance sheet. Our EBITDA for the first half was $40.5 million, and that's 30.1% up on the prior comparative period and a very healthy 56% EBITDA margin, which Matt obviously mentioned before. So in the first half, there's no adjustments to our statutory profit. So our NPAT and -- and there's no underlying adjustments between the 2, so there's no reconciling items this year. Underlying earnings per share for the first half was $0.113 per share, and we declared an interim dividend today, as Matt mentioned, of $0.0906 per share, which is fully franked. So just to summarize, very strong continued growth. We've improved our already attractive EBITDA margins, and this is flowing through to dividends to our shareholders. So just moving ahead to Slide 20. So the next slide, you've seen pretty much most of these numbers previously as they're up -- they're included in our operating update, so won't dwell too much on them. But 1 number to call out again is the FUA growth, which increased by $10.3 billion for the last 12 months for the calendar year. And as mentioned before, $4.5 billion of the first half growth was in net FUA flows. Our average account size continues to increase due to the -- our success in the high-value financial service practices. Pleasingly, our platform revenue per account also has continued to increase as touched on before. You'd be aware that this is a very key metric for us, and it's increased to $1,666 per account. And I'll expand on that in the next slide. So this next slide, Slide 21, has got 3 charts, which should be familiar to many of you that have been following us for a while. The top chart on the right-hand side sets out the average account size increasing trend. The middle chart on the right side sets out the revenue per account, and that's increasing gradually. And then at the bottom is the basis points. So we're obviously -- we have one eye on the basis points, but we're more focused on the revenue per account. So it's -- one of the drivers of that, apart from the average account size increasing, has been some of the reductions in the admin fee that many of you will be aware of. And in the second half, there will be some further reduction in the admin fee as the full impact of the pricing reductions comes through in the second half, which we've mentioned in previous announcements. Moving ahead to Slide 22. So this is an interesting slide in that it sets out where we -- where our -- what the components of our revenue are. When we IPO-ed, the admin fees was in excess of 60% -- I think 61% from memory. So that's now down at 49%. And that's a function of a couple of things. One, there has been some admin fee pressure, clearly, but pleasingly, we've been able to continue to increase in the other revenue sources and develop ancillaries and transaction fees. So the dollar value and the percentage of transaction fees in the first half was at 12% of our platform revenue, which is up from 6% in the equivalent period last year. And that's certainly helped cushion some of the impacts of the reductions in our cash fee margins. So if -- you'd be aware that the RBA made -- now made a couple of cuts over the last 12 months, which has taken from 40% -- 40 basis points off the -- what was the preexisting margin for cash. So certainly the increase in the transaction fees has really helped us cushion some of that pressure or fill the void that was -- some of the cash reductions has caused. Moving on to Slide 23. So this is just a slide that sets out our costs. Nothing unusual here in terms of what the composition is. As you'd expect, the main driver of our cost is people. We added 65 roles in the calendar year to December 2020, which is a pretty, I think, impressive effort given the COVID environment that we're in. We've continued to onboard our staffing that are working remotely. So that's resulted in an increase in our expenses of 15.8%, which obviously is significantly less than the increase over the prior comparative period for revenue, which is at 24%. So just on the COVID, as we -- I think in previous updates, we were able to adjust to remote working pretty smoothly, and the impact to expenses actually was pretty minimal. We did actually save some money on on-premises and travel and marketing, and were able to continue to onboard staff, which was obviously important as we were continuing to grow. So just giving a bit more information around where we hired people, on Slide 24. So we added 32 staff in the first half, and 25 of those staff were in the technology team. So we have also built out the product development and sales teams to some degree in adding 6 resources. But really pleasingly, the operations teams actually were able to demonstrate their scalability. So whilst we added $4.5 billion in net flows, the actual operations team reduced by 3 over the first half. So that really does demonstrate the incredible scalability that we now have despite our very significant growth. Moving into Slide 25, which is my final slide, just to summarize again that we've had a very, very strong first half. There's a strong cost management, really good operating leverage. We've got EBITDA margin in the first half of 56%, strong correlation, low working capital requirements for the business. We've got virtually -- we've had limited capital expenditure. And we -- the internal software and product maintenance enhancements are continuing to be expensed. So that means we have better quality of earnings as we've got no potential for impairment in the future, so really got a strong position. And with that, I'll hand over to Matt, who will summarize the business highlights and provide an operating outlook.

Thanks, Grant. As mentioned, I won't spend a lot of time rehashing what we've just heard. But it has been a fantastic year. As you would have seen, we have got a very strong track record of growth in both FUA growth, FUM growth, revenue and also profitability, and we've shown these over many, many years. A big part of that is our continued focus on innovation and platform technology as well as service. And we're delighted that we continue to not only invest into the core platform but also be able to build out and deliver new products and services to our clients that not only help them deliver advice and achieve better financial outcomes, but also help diversify our revenue streams. As mentioned, we're very excited about our strategic investment in Xeppo and believe that's going to really help build the moat around the business and allow us to provide new products and services that aren't broadly available in the industry. We are also very fortunate in that, in addition to our growth and organic growth, we are benefiting from significant industry trends. The market is fragmenting and continues to fragment at a rate of knots. And we certainly are in prime position to benefit from that, as advisers look to move licensees, shift on to more contemporary platforms and rebuild their value propositions. We are very focused on, as Grant mentioned, making sure that we do continue to invest in the future. Platforms are evolving rapidly. And for us to make sure that we keep our competitive edge, we need to invest into the new technology that's been discussed. Typically, that involves head count, and Grant showed you where the growth is across the business. Equally though, we are also focused on making sure that with the growth that we can backfill and ensure that we're set for the future when it comes to service delivery. And a lot of the developments that we've made over the last 6 months have also been around enhancing our overall service proposition, adding live chat features to the platform as well as knowledge centers to help our customers find the information quickly and easily when they want to. We have exceptional cash generation. As Grant mentioned, we don't capitalize, and therefore it flows straight through. We're extremely profitable. Importantly in this environment, we have no debt, and we managed to provide a good return to shareholders with a fully franked interim dividend of $0.0906 per share. Looking forward, we're going to be continuing to do much of the same. And if you can please move to Page 28. We will absolutely continue to benefit from the disruption in the market. The sales team is actively working to source new opportunities. Our pipeline is extremely healthy, and we don't see that slowing down in the foreseeable future. As a result of that, not surprisingly, we expect to increase market share. However, that's never our primary objective. We are about profitable growth. Net flows next year, we've increased our guidance slightly from $8 billion to -- somewhere between $8.5 billion and $9 billion. And a big part of this is, in addition to growing our core client segment, mass affluent, we are benefiting from the growth in affluent and high net worth individuals. And the premium product launched back in March underpins much of that success. New pricing was announced back in March. And whilst clients have been progressively moving to that new pricing since it was announced back then, we have also, on the 1st of January, fully transitioned to back book for anyone that hadn't taken advantage of the new pricing, and that is now being executed and in place. As a result of that, we don't expect our administration fee income to increase significantly for the second half compared to the first half. And equally, the reduction in pooled cash transaction account and the current reduction in interest rates, which we've absorbed, will reduce ancillary revenues from the RBA announcement date. Moving to Page 29, please. We will be continuing to invest into our IT. We've got a significant number of projects on the go we need to get completed, including the continued enhancement of Xwrap and also our new mobile technology. And over the last 6 months, we added 25 additional head count. We're looking at not only the new features but also looking at how we can continue to enhance our operational efficiency and scalability. As you've seen, our growth has been substantial, and it's really important that we can make sure that our technology is always, looking forward, enabled to cope with the growth. We're building synergies not only with Xeppo, but we're also looking at a number of third-party relationships where we can extend our offering through their technology via APIs. And that was rolled out in late December and will continue to be enhanced. As mentioned back on the summary, we have -- we remain in a very, very strong financial position, which is supported by a diverse and robust sales and transition pipeline. We remain very profitable, and we've got very strong EBITDA margins. And as you would have heard now multiple times, there's a very high correlation between EBITDA and the operating cash flow resulting in that exceptional cash generation. Our revenue is -- has a very high level of recurring revenue, and that means that it's very predictable, which particularly in the volatile markets and also with the backdrop that we're living through, we believe is very important. Importantly, we've got very low CapEx. We have no debt, and we've also got significant cash reserves. And on that note, I'd like to thank you for listening, and we have time to take question and answers from anyone on the call.

[Operator Instructions] Your first question comes from Siraj Ahmed from Citi.

Can you hear me okay?

We can.

Oh, great. Solid result. Three questions from me. Just first one, just an update in -- for -- to -- as of 15 February, can you just -- I don't know what that means by flows versus market movement. Our estimate is around $1 billion in flows. Is that fair?

We're not giving out the flow number at this stage. But we can provide that in the next quarterly update. Grant, do you want to add to that?

No, you answered it.

Okay. I guess, okay, maybe the actual question is, I mean, your flows -- there is seasonality in flows, right? Is there anything that we should be thinking about from the fact that flows could slow down in the fourth quarter, or something that you are seeing -- that you anticipate, sorry?

Yes. So we provide an indication, we believe, flows for the full year will be between $8.5 billion and $9 billion. That is our best estimate on where we think they will be, and we don't believe any reason that, that will change.

All right. Second question, just on admin fee guidance. Can I just clarify, does that assume FUA growing? I mean is that including FUA growth into the second half, the guidance of admin fee and being flat half-on-half?

Grant, do you want to take that?

Yes, sure. It does include that. We're -- basically, we're saying that we think based on the reductions -- the impact of reductions that came through in January that, that will offset the FUA growth that we will have.

Sure, Grant. So does that essentially mean that a lot of clients did not move voluntarily and that a big chunk really moved on Jan 1? Is that the way to think about it?

Yes. So when we made the change to the fee, we obviously gave the option for clients to move earlier. There was actually -- we provide -- we made it very easy for them. We've provided a calculator. We don't really control the speed, so we were actually surprised some groups took it up really quickly. Others didn't make -- take advantage of the changes. So we moved them on the 1st of January. It's probably -- it's fair to say there was less took advantage of it. They're not unexpected, but it's pretty hard to predict the adviser behavior.

Grant, I might just add to that transition note. The repricing has been occurring over multiple years. So clients have been moving to wholesale rates for a period of time now, not just from the 1st of March.

Sure. Last one, EBITDA margins, very strong margin expansion. I mean is the OpEx base in first half represented? I'm sure there's a bit of growth. But is that -- should we be thinking there's a meaningful step-up from that? And given admin fee and cash margins coming down, how should we think about EBITDA margins in 2H?

Grant, [ you want to take that ]?

Yes. So in terms of -- are you happy me taking that?

Yes, absolutely.

Yes. So certainly, as we flagged, we're going to -- we have hired significant staff in the first half in the technology area. I can't see that slowing down over the next short period. We're pretty committed to continuing to invest. You need to assume that there will be -- continue to be growth in our operating expenses. We haven't given specific guidance on what that will be, but it's the rate of growth that we have and the amount of functionality that we want to continue to build, means that we'll continue to build on that. In terms of the EBITDA margin for the second half, there are some headwinds on the revenue that we've spoken about, the fact that admin fees aren't going to increase. And the cash balance has come down from where it was at the start of the year. We give out -- we've given out quarterly updates on that. So people who should be able to plot where the cash balance has been, so that will have a negative impact on ancillaries on that line. So [ haven't the really ] the final answer, but there's obviously, there's some things that are going to impact that EBITDA margin in the second half that you need to be aware of.

Your next question comes from Bob Chen from JPMorgan.

Just a couple of questions for me. Obviously, we saw a pretty strong increase in transaction-based revenues over the half. I mean how has that been sort of tracking in -- to date in the second half?

Yes. So we haven't obviously given a trading update on revenue in the second half, but I think the major driver of our transaction fees is market activity. So you guys should be aware as -- in terms of what's happening in terms of the markets. If there's a lot of volatility there, there are transactions. And then you've got some seasonal factors where January can be slower than other months just due to seasonal factors. So there's nothing really at this stage that we have given updates on in terms of our transaction volumes, so you're just going to have to look at the overall market and assume that our volumes will be similar then, the overall market activity. The other thing that impacts our transaction fees apart from those overall market levels is the activities of our model managers in our managed accounts. Some of the transaction volumes come from that; and clearly, our managed account is growing significantly. So it's subject to when the model managers decide to rebalance. We obviously earn some money when the managed account models are rebalanced. And that's the other driver.

Okay. Perfect. And then just in terms of the pipeline of onboarding so there are more advisers, I think you made some sort of high-level commentary about the pipeline's strong. But can you talk a little bit about that in the context of comparing it to how you sort of tracked last year?

Yes. So the slide that I skipped over back in the deck was we added 136 advisers in the 6 months. So we're seeing a significant number of new advisers coming onto the platform trailing us for the first time and also committing to transitions. So comparing it to previous periods, look, it's always pretty busy, and you would have seen that the flows have been fairly consistent over the last couple of years. So it is very healthy. As far as a direct comparison, I'd say on par.

Okay. Great. And then just a question on the sort of opportunity there with Xeppo. I mean is there any sort of revenues attached to sort of rolling that out more broadly?

Yes. So with Xeppo, firstly, it gives us great reach into the accounting market, and we're seeing a convergence of accounting and wealth firms. That puts us in a really good position to go and provide a valuable solution to those firms. When we do the integration and roll out the new Netwealth mobile experience, there will be a fee attached to that. So practices will get a base product for free. But if they look to upgrade over time and use some of the more professional or pro features, there'll be a fee associated with that, and that's very much part of our SaaS strategy and also user payers, where the people or the person getting the benefit of that particular technology or product will pay for it.

Okay. Great. And what was the time line onto that -- rolling that out?

So integration starts in the next 6 to 8 weeks.

Your next question comes from Simon Fitzgerald from Evans.

The first one, I was just wanting to get a little bit more clarity in terms of Xwrap in terms of a little bit more about your ambitions in the noncustody area and how we should think about fees in that sort of category going forward, just given that you might see a bit of an additional mix in terms of that noncustody versus custody ownership there.

Yes, absolutely. So Xwrap is a really important part of the platform moving forward; and certainly, in some of the recent research, we're seeing advisers actively seeking out platforms that offer it as a solution. The service has been built out and designed to cater for the noncustody of platform assets, which we believe high net worth firm will typically account for somewhere between 20% and 25% of your client's total portfolio. So we're certainly not looking to cannibalize our existing business, and it really hasn't been designed to administer or support, I guess, your more traditional assets. It's for the weird and wonderful esoteric assets. Obviously it's hedge funds, foreign currencies, property, et cetera. So we think it's an additional revenue line. In its own right, it's not going to significantly move the dial, but it is all about just continually increasing those revenue streams but also looking to attract more groups onto the platform. If you go onto the website, I think it's all public. So for an Xwrap account, so that is for an individual entity, we charge $15 a month for that service. And there's a minimum fee per practice to ensure that we can provide the training and support for Xwrap, which is obviously new and requires additional support.

Okay. That's fair. Then the second question just relates to the cash accounts. Can I just confirm with you, Grant, that the decrease of the percentage of revenue, so 55% to 49%. Is that mainly to do with the decrease of earnings on the cash accounts, which we can attribute to the RBA rate changes?

No. I would say it's probably mainly not. Like the rate changes have -- the first rate change was largely offset by increased balances over that period because of volatility. So that was -- for a while, that was cushioned. And we started the year with, I think it was, 10% of the FUA in cash balances. So we got off to a good start. And the second rate cut, as you know, wasn't until November. So I'd say it's -- the mix is really around increasing the transaction fees and slight reductions in the overall percentage of admin fees.

So essentially, with the rate reduction team, we're going to see that wash through in the second half, et cetera.

Sorry, I just missed that.

So with the rate reductions, we'll see those wash through in the second half.